Canadian drivers are paying significantly more for diesel than gasoline, a gap that has widened to 30-40 cents per litre in recent months. The divergence stems from a combination of carbon pricing policies, global refining constraints, and seasonal demand shifts, according to industry analysts.
Carbon Tax Adds to Diesel's Burden
Canada's federal carbon tax, which applies a levy on fuels based on their emissions intensity, hits diesel harder than gasoline. Diesel produces about 16% more carbon dioxide per litre than gasoline, meaning the tax per litre is higher. As of April 2026, the carbon price is $170 per tonne of CO2, adding roughly 45 cents per litre to diesel compared to 39 cents for gasoline. This alone accounts for about 6 cents of the price gap.
Global Refining Shortages Tighten Supply
Refinery closures during the pandemic and the ongoing shift to renewable fuels have reduced global diesel production capacity. In Canada, several refineries have converted to produce renewable diesel, which further squeezed conventional diesel supply. "The market is facing a structural deficit," said Michael Smith, an energy analyst at Calgary-based Petronomics. "We're seeing less diesel available globally, and that's pushing up wholesale prices."
Seasonal Demand for Heating Oil
Diesel and heating oil are chemically similar, and cold weather in Canada and the northern United States drives up demand for heating oil, which competes for the same refining output. This winter, an extended cold snap increased consumption, keeping diesel prices elevated even as gasoline prices softened. "Heating oil demand is a wild card that can spike diesel prices well into spring," Smith added.
Impact on Consumers and Businesses
The higher diesel costs ripple through the economy, affecting trucking, farming, and construction. The Canadian Trucking Alliance estimates that the price gap adds $2,000 to $3,000 annually in fuel costs per long-haul truck. For farmers, diesel is critical for planting and harvest, squeezing margins. "Every cent per litre matters when you're running a fleet," said Jean-Pierre Dupuis, a Quebec-based trucking company owner. "We've had to add fuel surcharges just to break even."
Outlook: Premium Likely to Persist
Analysts predict the diesel-gas price gap will remain wide through 2026, as carbon pricing continues to rise and refining capacity remains tight. The federal government plans to increase the carbon price to $200 per tonne by 2028, which would widen the gap further. Meanwhile, investments in renewable diesel production may take years to offset conventional supply losses.
